At 0.2%, quarterly Scottish growth is double what it was last quarter (Q2 2017: +0.1%), but still half of UK quarterly growth for Q3 (+0.4%). The last time Scottish quarterly growth was higher than the UK as a whole was in Q1 2017 (0.6% in Scotland compared to 0.3% in the UK).
After a steady decrease in annual GDP growth from Q1 2015 to Q2 2016, annual growth has been slowly rising and is now at 0.6% – close to its value this time last year (+0.5%). This is still far below the last annual peak in Q1 2015 (+3.2%). In fact, this is the seventh quarter since growth has been under 1%.
While growth in the past three quarters (0.4%, 0.5% and 0.6%) may look like the beginning of a promising trend, this may reach its peak quite soon if the Scottish Fiscal Commission’s forecast for the next five years becomes reality. You’ll remember that the SFC forecasted Scottish annual growth below 1% for each of the next four years.
Table 1: GDP, SFC for the Scottish economy (Dec 2017)
|GDP growth (%)||0.7||0.7||0.9||0.6||0.9||1.1|
Some may question why the SFC is so much more cautious about Scotland’s growth rate than the OBR is about the UK’s – tune in to next week’s Economy, Jobs and Fair Work Committee session for more discussion on this. However the difference does seem to mirror the trend gap between Scottish and UK growth rates over the past two years. This is widening over time and in Q3 2017, annual Scottish growth (+0.6%) is just over a third of what it is in the UK as a whole (+1.7%).
GDP per person
The gap between GDP per person in Scotland and in the UK as a whole is also growing. Quarterly GDP per person growth in Scotland was flat in Q3 2017 while it registered an (arguably still low) growth of 0.2% in the UK. On an annual basis, GDP per person grew by only 0.2% in Scotland. This compares to 1.1% in the UK.
GDP growth by sector
Growth this quarter was driven by relatively strong growth in the production and services sectors. Agriculture, forestry and fishing grew also but these combined only account for 1.4% of the Scottish economy.
Growth in production was pulled by very strong growth in the electricity and gas supply sector (+7.3%) (but this is a volatile sector) and to a lesser extent in manufacturing (+2.9%).
Table 2: Top 2 and lowest 2 industry groups in terms of annual growth
|Production: Electricity & gas supply||
|Production: Refined Petroleum, Chemical & Pharmaceutical Products||
|Production: Water Supply & Waste Management||
Recent figures on manufacturing for the whole of the UK, from the Office for National Statistics (ONS), show that output is at its highest since 2008. So how do the figures for Scotland compare?
Manufacturing in Scotland saw strong growth between 2009 and 2014, increasing by 24%. However, from the fourth quarter of 2014 to the second quarter 2016 output fell by 7% while the UK overall saw no growth. Since then the UK has seen 3% growth while Scotland has seen 0.3%. The recent low growth has therefore widened the gap between UK and Scottish manufacturing performance.
Anouk Berthier, Senior Researcher and Andrew Aiton, Data Manager, Financial Scrutiny Unit